Metro in India: Can It Carry Forward With Its Cash & Carry Model?

Abstract:
Metro Cash & Carry, the German retail giant has been into wholesale cash and carry business since its inception in 1964. Initially it crossed the border to avoid the turbulence and instability of the home market. But that was just a beginning for Metro. Acquiring more conglomerates and expanding throughout Europe, Metro became one of the topmost retail players in Europe. Soon, it had to find new territories for expansion. By 1995, Metro SB-Grossmarkte had become Metro Holdings and then finally Metro AG, combining four of its major German subsidiaries. Soon after realising the lull in the European market, Metro entered the vibrant market of Asia. Entering China through a joint venture and then the tough market of Japan, Metro set its eyes on India, an emerging retail market with an enormous potential. But the Government of India was highly protective when it came to domestic trading. However, through an approval of Foreign Investment Promotion Board in 2000, Metro started the preparation for its entry to the subcontinent. By 2002, an amendment in the approval allowed Metro to engage in Business-to-Businesss (B2B) cash and carry wholesale trading. In 2003, Metro cash and carry started its operations by opening a distribution centre in Bangalore, a major city and IT centre in Southern India. But in India where domestic traders were apprehensive about foreigners' involvement in domestic trade, all Metro could receive was protests and accusations and of course, restrictions. But despite the setbacks, Metro moved cautiously, establishing centres in major business centres of Indian market. In 2006, as government introduced 100% FDI in cash and carry wholesale business, global retailers who had been eyeing India for a long time were ready to grab the opportunity, threatening Metro and to remove the monopoly of the cash and carry market. Now with its experience and global exposure in modern wholesale, would Metro be able to make another success story? Or would it be forced to change the business model. In the ever-changing market of India, rules are made and broken so fast that companies hardly get time to change their tactics.

The case assesses the ability of cash and carry players to develop a sustainable business model that suits the market of India. It also analyses the business model and operations of Metro in India and throws some light over the possible challenges the company might face in the country.